RIDING A WINNER
Mulholland believes that Polaris Industries (PII), a manufacturer of all-terrain vehicles, snowmobiles and jet skis, also has a winning strategy. Like Apple, Polaris, based in Medina, Minn., was added to the portfolio during the downturn. Polaris has entered the motorcycle market, which hasn't been totally smooth riding. "They were competing against Harley, which has incredible brand recognition," Mulholland says.
In 2011, Polaris pushed ahead with the acquisition of Indian, a maker of motorcycles whose strong brand loyalty rivals Harley-Davidson. Polaris already owned Victory motorcycles. The company is making inroads and is now No. 2 in sales of heavyweight motorcycles.
In the third quarter of 2012, Polaris earnings rose 39%, mostly on the strength of its snowmobiles. But Mulholland believes that the rollout of new Indian motorcycles later this year will add even more to the firm's bottom line.
The stock is worth 12 times more than what Mulholland paid for it back in 2008, so he's no longer adding to the position. Over the 12 months that ended on Jan. 10, shares were up 46.5%. "It's now more fairly priced," he adds.
Another name in the Matthew 25 lineup is Cabela's (CAB), based in Sidney, Neb., a retailer of hunting, fishing and camping gear. Though Mulholland initiated his position in the stock in 2007 at around $16 a share, he bought big when shares dipped below $5. The stock recently traded at $47, but Mulholland believes it could go higher still.
Cabela's has a robust mail-order and online business, and is expanding its retail footprint beyond the 32 stores it has in the U.S. and Canada. "It could triple its stores and not saturate the market," Mulholland says. The company's shares are up 76.4% over the last 12-months through Jan. 10, helped by a 20% increase in third-quarter earnings.
Berkshire Hathaway (BRK), the holding company run by Warren Buffett, has had a place in the fund since the beginning.
"I'm a big believer, if you've got something that's exceptional, you should stick with it," Mulholland says about the legendary Omaha, Neb.-based firm. And he has.
Ilana Polyak, a Financial Planning contributing writer in Northampton, Mass., has also written for The New York Times, Money and Kiplinger's.
Matthew 25 Fund
Credentials: B.A. in economics, Lafayette College
Experience: Portfolio manager, Matthew 25 fund (1995-present); stockbroker, Boenning & Scattergood (1996-present); stockbroker, PaineWebber (1988-1995); stockbroker, Advest (1983-1988)
Inception of fund: October 1995
Style: Large Growth
AUM: $362 million
Three-year performance as of Jan. 10: 24.39%
Five-year performance as of Jan. 10: 13.09%
Expense ratio: 1.22%
Front load: None
Minimum investment: $10,000
Alpha: 10.40 vs. S&P 500